Blockbuster’s massive debt could mark the end

Blockbuster is facing a multi-million dollar interest debt payment that the company cannot pay as they continue to burn cash at an “alarming rate,” an analyst said in a recent report.

The latest round of financial uncertainty has raised some doubt as to how long the company will be able to operate.

Blockbuster's massive debt could mark the end

Blockbuster is still having trouble competing with newer technologies and services, but they have been able to fare better than Hollywood Video, which is expected to liquidate its current stores. Reports indicate that Hollywood Video will drastically reduce the cost of movies — and sell old stock — which might eat into Blockbuster’s DVD & Blu-ray sales business.

Despite continued troubles, Blockbuster will rely on DVD/Blu-ray and video game rentals in an effort to stay afloat.

The company continues to try and persevere at a time when Netflix, Redbox and other competitors continue to see great success.  Blockbuster plans to test another online video game rental service in Cleveland — and could launch the service to other cities, assuming the company survives into 2011.

Even though 20th Century Fox, Warner Home Video and other studios have forced Redbox and Netflix to agree to 28-day new release rental delay windows, Blockbuster still has new release movies available for immediate rental.  However, analysts are unsure if this gives the company much of a real-world advantage against the cheaper, more convenient rental services.

“If the average value-oriented customer is willing to pass on the more expensive movie theater, video store and [transactional video-on-demand] in order to pay $1 per [day per] rental, waiting another 28 days should not be a problem,” said Michael Pachter, Wedbush Morgan Securities analyst, in a recent note.

If Blockbuster is unable to see any gains from custom agreements with movie studios,  I think it’s fully up to the company’s executives to push for more awareness and benefits from this exclusive opportunity.  The company has also promised to roll out more movie rental kiosks in select markets, but Redbox is still the most visible among consumers.